Author Archives: Robert Huberman

About Robert Huberman

Robert is finishing up his second year at Brooklyn Law School and expects to graduate in May 2014 with the Brooklyn Law School Real Estate Law Certificate. He received his B.A. from SUNY Binghamton University majoring in Philosophy, Politics, and Law, with a minor in History. He is currently interning at the New York City Department of Buildings and recently researched and wrote draft opinions on various mortgage and foreclosure issues, while interning with the Honorable William H. Pauley, in the Southern District of New York. This summer, he looks forward to clerking at Goldstein Hall PLLC where he will be working on affordable housing development and finance projects.

United States District Court in California Holds that MERS “Assignee” Lacked Standing Because no Evidence Showed MERS held the Note

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In Saxon Mortg. Services, Inc. v. Hillery, C-08-4357EMC, 2008 WL 5170180 (N.D. Cal. Dec. 9, 2008), the United States District Court, in the Northern District of California granted Hillery’s motion to dismiss because Saxon Mortgage Services, Inc., lacked standing.

Hillery obtained a loan from New Century Mortgage. A deed of trust for Hillery’s home secured repayment of the loan to New Century. Pursuant to the deed of trust, MERS was named as nominee for New Century, its successors, and was designated the beneficiary of the deed. Three days after obtaining the loan from New Century, Hillery tried to rescind the loan pursuant to the Truth in Lending Act (TILA). About a year later, Saxon, acting as the servicer for the loan, stated that it had received Hillery’s request to rescind. A year later, MERS, acting as nominee for New Century, assigned the deed of trust and promissory note to Consumer.

Saxon and Consumer brought suit against Hillery and Spielbauer Law Firm, asserting claims for declaratory relief pursuant to TILA. Hillery then filed a motion to dismiss claiming 1) insufficient service of process, 2) lack of subject matter jurisdiction, 3) lack of standing, 4) failure to state a claim for relief, and 5) failure to join an indispensable party.

Saxon provided proof of service, signed by a process server under penalty of perjury, supporting his assertion that substitute service was affected on Hillery. The Court acknowledged Hillery and her grandson’s declarations to the contrary, but held that those declarations were not enough to overcome the prima facie case established by Saxon. Additionally, the Court held that Saxon properly served the Spielbauer Law Firm because service was accomplished within 120 days of Saxon filing their complaint.

Hillery argued that a federal claim that is insubstantial cannot serve as the basis for federal question jurisdiction. Consumer claimed, however, that were Hillery to have filed suit first, her claims would have included allegations of TILA violations. Ultimately, the Court held that Hillery failed to demonstrate how Consumer’s TILA rescission claim would be insubstantial, since Hillerly threatened to bring a TILA rescission claim.

For Saxon to have standing, Consumer would also need to have standing. Thus on the issue of Consumer’s standing, the Court stated that there was evidence showing that the deed of trust was transferred to Consumer. New Century designated MERS as the beneficiary of the deed and gave MERS broad authority to act with respect to the property. Thus, the Court assumed that MERS had the power to assign the deed to Consumer and eventually did around June 20, 2008. But for there to be a valid assignment of the deed and the promissory note must be assigned. Here, there was no evidence establishing that MERS held the promissory note or was given authority by New Century to assign it. Thus, the Court held that Consumer did not have standing, and granted Hillery’s motion to dismiss without prejudice.

Florida Court of Appeals Held that Bank Defendant had Standing to Bring Foreclosure Claim and Plaintiff’s Due Process Rights were Not Violated

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In Harvey v. Deutsche Bank Nat. Trust Co., 69 So. 3d 300 (Fla. Dist. Ct. App. 2011), the District Court of Appeal of Florida, Fourth District, held that Deutsche Bank had standing to bring a foreclosure action as holder of the promissory note, and Harvey’s (borrower/homeowner’s) due process rights were not violated when the Circuit Court denied his motion for reconsideration without a hearing.

On September 17, 2009, Deutsche filed a motion for summary judgment, along with an affidavit of indebtedness. However, on September 30, 2009, Deutsche filed an affidavit of lost note. At that point, the trial judge told Harvey that nothing would be done until the lost note affidavit was in the court’s file. On October 29, 2009, Deutsche filed a copy of the assignment of mortgage from MERS to Deutsche, with an effective date of March 31, 2009.

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Harvey argued that the assignment was fraudulent because it was not filed until twenty days after Deutsche filed the foreclosure. But the trial judge claimed that there was no record evidence supporting Harvey’s position. Harvey then filed a motion for reconsideration which was denied by the Circuit Court. Harvey appealed claiming 1) summary judgment should not have been granted because a genuine issue of material fact existed as to Deutsche’s standing to foreclose and 2) the Circuit Court erred and violated Harvey’s due process rights by denying his motion for reconsideration without holding a hearing. Here, the Court held 1) because the note at issue was payable to AHMAI, indorsed in blank, and Deutsche possessed the original note and filed it with the Circuit Court, Deutsche’s standing could be established from its status as the note holder regardless of any recorded assignments. 2) Harvey failed to present evidence supporting her argument that the mortgage assignment had questionable signatures. And 3) due process does not require a trial court to hold a hearing before it denies a motion for a new trial. Thus, since the Circuit Court properly found that Deutsche had standing to enforce the note — based on uncontroverted record evidence—Harvey’s motion for reconsideration was properly denied without a hearing and summary judgment was properly granted.

Florida Court of Appeal held that Loan Servicer Defendant was the Proper Holder of Promissory Note and Mortgage, and Granted Summary Judgment

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In Riggs v. Aurora Loan Services, LLC, 36 So. 3d 932 (Fla. Dist. Ct. App. 2010), the District Court of Appeal of Florida, Fourth District, held that Aurora Loan Services, LLC, was the lawful holder of a promissory note and affirmed the Circuit Court’s decision granting Aurora’s motion for summary judgment.

Riggs, the borrower/homeowner, objected to Aurora’s foreclosure action on the grounds that Aurora’s promissory note had a blank indorsement and thus failed to conclusively establish that Aurora was the lawful owner and holder of the note. The Court disagreed.

Aurora possessed the original note which was indorsed in blank and signed as required. The Court noted that because the indorsement was a blank indorsement, the note was payable to bearer and could be negotiated by transfer of possession alone. The Court then held that Aurora was the holder of the note, and was entitled to enforce it, because the note was negotiated by its transfer of possession. The Court also found no authentication issue since Riggs never challenged the authenticity of the signature at issue in his pleadings, and because the promissory note was self-authenticating. Thus, because Aurora offered supporting affidavits and the original note with a blank indorsement, the Court held that Aurora was the proper holder of the note and mortgage.

United States District Court in Florida Denies Plaintiff’s Motion to Remand Case to State Court

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In Diversified Mortg., Inc. v. Merscorp, Inc., 809-CV-2497-T-33EAJ, 2010 WL 1793632 (M.D. Fla. May 5, 2010) the United States District Court, in the Middle District of Florida, denied Diversified Mortgage Inc.’s motion to remand its case to state court. MERS originally removed its case to federal court alleging complete diversity of citizenship between the parties and an amount in controversy above $75,000. Diversified filed the motion to remand the case claiming that the amount in controversy “ha[d] not been met.” Diversified argued that it did not request monetary damages but instead sought declaratory and injunctive relief. The Court noted, however, that “for equitable claims such as ones for declaratory or injunctive relief, the amount in controversy is determined by the object of the litigation that will flow to Diversified, not the damages.” Thus, because Diversified sought declaration as to whether it had any ownership in 65-135 mortgage loans, the amount in controversy would be determined from the monetary value of the benefit the Court declared Diversified had in the mortgages at issue.

Diversified responded by claiming that if it had an interest in the mortgages, it is unlikely that Diversified would seek collection from MERS. Instead, Diversified would pursue many individual actions against unidentified mortgage companies, or not pursue any actions at all. But the Court noted that the amount in controversy is determined by the face value of the mortgages and not by the level of ease or difficulty associated with collecting the loan amounts. Consequently, the Court reviewed the mortgage documents, determined that the amount in controversy exceeded $75,000, and denied Diversified’s motion.

United States District Court in California Denies Plaintiff’s Motion for Temporary Injunctive Relief, Allowing Non-Judicial Foreclosure

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In Chilton v. Fed. Nat. Mortg. Ass’n, 1:09-CV-02187 OWW SM, 2009 WL 5197869 (E.D. Cal. Dec. 23, 2009), the United States District Court, in the Eastern District of California denied Chilton’s motion for temporary injunctive relief. Chilton filed a complaint alleging that Federal National Mortgage Association (Fannie Mae) violated provisions within U.S.C. Title 15, regarding Commerce and Trade, and/or U.S.C. Title 18, regarding Crimes and Criminal Procedure, because Fannie Mae initiated a non-judicial foreclosure on her property without a genuine original note. Chilton then filed an order to show cause and motion for temporary restraining order, in an attempt to block the foreclosure process. The Court noted that in order to obtain temporary injunctive relief, Chilton must demonstrate a likelihood of success on the merits.

The Court rejected Chilton’s legal theory holding that non-judicial foreclosures can be commenced without producing an original promissory note. The Court noted that under California Civil Code § 2924, et seq. Section 2924(a)(1), regarding Mortgages in General, a trustee, mortgagee, beneficiary or any of their authorized agents may conduct a foreclosure. In addition, the party initiating the foreclosure need not be in possession of the original note. Consequently, the Court held that Chilton was unlikely to succeed on her claim for relief, and thus found it unnecessary to set Chilton’s motion for temporary injunctive relief for a hearing.